Hey, my work here at Mixergy is sponsored by three great companies. First is TeamworkPM. TeamworkPM.net is where you go when you want project management made easy. If you’re already using a project management solution and you’re seeing prices increase, go to TeamworkPM.net. They’ve got very reasonable prices and a system that will scale up with you as your organization grows. Scale up to the place where Universal Studios trusts them, and the University of Texas at Austin and the U.S. Army, and so many other organizations. So check out TeamworkPM.net.
And if you need a lawyer, you need the entrepreneur’s lawyer. That’s why I keep recommending Scott Edward Walker of Walker Corporate Law. He’s a lawyer who blogs. He’s a lawyer who answers questions on Quora. He’s a lawyer who’s in this community, who knows who’s in it, and can anticipate what you’re going to be looking for. You’re probably going to want to know how to deal with options, right, for your employees. You’re probably going to want to know how to raise money and how to structure a deal. You’re probably going to want to, at some point, either sell or buy a company. You need a lawyer who’s in this industry who can help you with all that and so much more, which is why I always recommend Scott Edward Walker of Walker Corporate Law.
All right. And finally, I want to tell you about, who’s last? Oh, last sponsor is Shopify. Shopify is where I first went online to set up my very first store. It’s dead simple. You get your own storefront with your own company name and your own dot.com, which is why I urge you, if you need to set up a store, to check out Shopify.com and get it all up and running easily and quickly. Shopify, by the way, also is so easy that if you’ve got a friend who needs to set up a store or has been talking forever about it, selling something online, that’s where you can send him. Shopify.com.
Here’s the program:
Andrew: Hey, everyone. It’s Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and a place where I interview entrepreneurs about how they built their business and I ask them to teach us their best techniques so you can go out there, build your company, come back here, and do your own interview on Mixergy so you can teach others. Joining me is Jude Gomila, the co-founder of Heyzap. And after I interview Jude today, I hope to never interview anyone else from Heyzap again. I went to Heyzap.com to prep for this interview, the way that I did when I interviewed your co-founder, and I started playing a game and then I started playing another game, and I got so friggin’ hooked that I started looking for ways to block Heyzap from my computer. And I said no, just step away and go do some research. Well, the reason I . . .
Jude: You wouldn’t be able to . . .
Andrew: Sorry?
Jude: You wouldn’t be able to block Heyzap because we’re distributing out to all the websites, so you would have to block the entire Internet.
Andrew: There is no way, and usually I’m not that weak. I can get in and out of it. I usually would play a Heyzap game sitting on the couch maybe while listening to Howard Stern or an audiobook from Audible, but I happened to be doing research and I got hooked on these friggin’ games. I should do a whole interview, by the way, with you on how you make those games so addictive so quickly. But today I’ve got a different agenda for you. I want to find out about marketing. I want to find out how you got ten million people hooked on your games and how you did that, how you got them to spread the word, how you did it through viral marketing. And you sent me some notes before the interview. And you and I looked over them and we started talking about them. That’s what I want to go over here, some of what you showed me and beyond, so we can learn about viral marketing through you, you evil Heyzap co-founder.
Jude: There’s no evil here. So, hi, everybody. I’m Jude from Heyzap, and we are building essentially a large network of games across many websites. So we’ve distributed the games out to 320,000 sites now. We have 30,000 games on the platform and 6,000 developers. And I wanted to today go into why and how we’ve actually managed to do this, and try and break down the virality and retention at a more academic and practical level and allow you to apply it to your websites and applications.
So I’d like to start off with virality first. There are two main concepts to understand when you’re thinking about virality. There are the channels in which you can push the viral object through (i.e., Facebook, Twitter, YouTube, social bookmarks, platforms, forums, IM). And then there are the actual methods by which you actually apply the virality through the channel. So this would be sharing, inviting, challenging, gifting. So I want to break down some of these methods, so . . .
Andrew: OK.
Jude: So a common method everybody uses is sharing. So sharing is the general umbrella term for any kind of process where I’m taking some kind of message or some kind of object and pushing it out to someone else. So, for example, if I’m doing a simple Facebook share, your application, you know, you’ve been playing on a game and at the end of the first level, you’re going to click share and you’re going to share it out to Facebook. So, in that particular case, you’ve got the method of sharing and the channel is Facebook. Very simple, right?
So, let’s have a look at another case study, Foursquare for example. Foursquare is a very, when you check in to something as a very specific type of share, you are telling the world that you have checked in to this location. The channels that you tell the world usually are Facebook or the Foursquare social graph, or you can even Tweet it out. So, the best thing to do is to come up with a very, very knife-like killer share type and then match it with the appropriate channels. Now it happens to be that Facebook and Twitter are the most viral channels to push your stuff out to, and the check-in meme is a very specific share that works very well with location. So you have to match the type of message that you’re doing with the application that you’re actually running. So if you’re in a game, a share works very well. If you’re doing location-based stuff, a check-in works very well. So think about the message that you’re going to share. Think about the very specific call to action that you’re going to put in there, ‘cuz that call to action, when the other users read that message, they’ll have a much higher click-through rate if the message is highly contextual and if the user themselves have actually written the message. You have question? Your mute button’s on again.
Andrew: . . . today. We were doing this even in the pre-interview. What other sharing methods are out there?
Jude: Sure, so you can also do an invite of friends. So this is slightly different from a share. So I can actually post on to Facebook and invite my friends into a game. Inviting is a very high level concept, so you can invite different groups of people depending on what type of users you’re trying to get into the application. So if it’s a social game, it makes sense to invite your Facebook friends.
Andrew: I’m sorry. I meant, within sharing, what other techniques are there? What would I be sharing? I’d be sharing location. What else? What are some other examples?
Jude: Yeah, so you could be sharing location. You could be sharing what’s happening to you in the game, i.e. I just leveled up. You could share your current status. So it might be a personal feeling or an emotion that you’re having. So you may say, I’m just rocking out in this game or this game is awesome. So you can share something about the game, something about the application. It could be a question in Quora. You could be saying, can anyone answer this question for me? And usually questions, as a share, have a very high click-through rate, especially if they’re contextual because the users in your graph want to actually understand what the answer is to the question and they want to help you. So your friends generally want to help you. And if you say something like, this game is awesome, as opposed to, can you help me find this object in the game, the one with the question will usually have a bigger response rate.
Andrew: Okay. How have you guys done that at Heyzap? How have you integrated sharing creatively?
Jude: So we’ve done it in many different ways. We put sharing mechanics inside the games themselves. So if you’re inside a particular game, let’s take the example of Barn Buddies, someone will share, like, “I found this new object in the game and it’s amazing, come and help me play the game.” Or they’ll be like, “My farm is on fire. Can anyone put it out for me?” So there’ll be a social action. So there are sharing things you can do inside the content. And then there are sharing things that you can do the outside content as well. You can be on the entire Heyzap page and share the entire Heyzap game section and say, “This set of games is amazing.” So there’s sharing mechanisms that are inside the content, there’s sharing mechanisms that are outside the content, and you can even share the content itself.
When people post a YouTube video to Facebook.com, they’re sharing the video and then they might have some of their experience in there. When people share from within Farmville, they’re sharing from within the game. And when people share from Quora, they’re sharing at the application level. They might be sharing the question or the application. So you’ve got to think what level, where do you want to be when you do a share? Do you want to do it inside the content? Do you want to do it just around the content? Or do you want to do it at the application level?
Andrew: What’s more effective? It seems to me, from what you’re saying, that being inside the game, inside the application, is where it’s most powerful?
Jude: It depends on what the content is. So for games, doing it inside the game makes complete sense because the user’s inside the game. Whereas for the video, the user’s not really inside the video, they’re not really interacting. They have a response to the video and they want a share the content with someone else, but they don’t have, because a video is less intricate in terms of what the user can engage with inside the content, they don’t share inside that content. Then you know, inside YouTube in itself, you can share, like, a channel, you can share like Black Eyed Pea’s channel which will have multiple pieces of content, and that’s sharing more of the application at website level.
When you say, “What’s the most effective?”, the most effective is, you want to build up your K-factor as website. You want to build up your virality. So if you’ve got the chance to put viral calls inside the content, you want to do it there. And you want to do it on the outside of content, and you want to do it at the application level because each different one is a different use case where you’ve got some probability of the user wanting to do a viral action. And if you can snap these up, all the little pieces of the K-factor add up and you’ve got a viral proposition. So you want to have a very core viral proposition, and then you want to add other pieces and craft the viral proposition. But you don’t want to bombard the user. You don’t want to, you know, your application can’t be in just one share button. It’s got to have something interesting, and then you’ve got to get people to think about why they want to tell their friends. And if you can crack that loop, then you’ve got a viral message. The viral message may not even become electronic. It may be word of mouth, because if the application is inherently interesting, it becomes word of mouth. So it’s like, “Have you used Twitter?” “Have you seen Farmville?” “Have you used Chatroulette?” If it becomes truly viral, it gets in the user’s mindset and they start speaking about it. “Have you checked into Foursquare recently?”
Andrew: Gotcha. OK. All right. And inviting is different because why? Different from sharing?
Jude: Sharing is a broadcast message. So I’m pushing a message out, and I’m not necessarily, my action, my user action, I’m not really thinking that I want people to come into the game. I’m just saying, “Look at me, look what I’m doing.” Sometimes I’m like, “I need help in this.” There’s a blurry line sometimes between sharing and inviting. The other one, inviting is primarily, I want to get friends in this application or game with me right now. And that’s the main objective when I do that invite. So inviting, you know, you can do select all, so you select all your friends. You can have specific friends. You can have, like, a more intelligent way where it matches people to what’s going on. So it might be people that play these types of games may want to play games with you. So you might want to invite them into the game. You can do inviting inside your social graph. You can do inviting outside of your social graph, like a general invite. So if you look at Apple’s Game Center, when they do inviting friends, you can invite your friends on your phonebook. Conceptually, you can invite people in your social graph in Facebook, or you can invite anyone. You can just say, I just want to play with someone right now, and none of my friends want to play, but I want to play with someone. So there’s different levels of inviting, and there’s different types of graphs that you can invite, too. And they have different responses.
Andrew: Give me an example of a different invitation system that you guys have within Heyzap and how it works.
Jude: Sure. So one of the invitation systems that we have inside is in-built into our social games, so users that want to play the games with their friends can quickly connect with Facebook and then select the friends they want to play with. It will then send the message out to Facebook. The user will click on the link. It will go to wherever the game is on the web, and the users can start playing with their friends.
Andrew: Gotcha.
Jude: So, there’s a difference as well between synchronous gameplay, where if I send a message out, I want to play with them right now. That would be a real-time invite. And there’s asynchronous gameplay, where I can make my move now, and I can build my farm up now, but I also want my friend to build up their farm tomorrow, so I can look at what their farm is. So you’ve got to think about, is your message a synchronous problem or an asynchronous problem? Something like Quora can be an asynchronous problem because they can answer the question in the next hour and I’ll have a look at it tomorrow. But something like multiplayer gameplay has to be synchronous. I have to play with the people right now. So you’ve got to figure out, what is your application, and are you going to do synchronous or asynchronous messaging?
Andrew: What’s worked best for you guys? Synchronous or asynchronous?
Jude: So most social games are actually asynchronous gameplay, and the reason why asynchronous messages are more effective in a way than synchronous messages is because most people, you’ve got a smaller probability of your friends being at the PC when you do that message right there and then. So that’s why lots of social games are actually built around asynchronous gameplay, and lots of applications like Quora is asynchronous gameplay. Even Facebook, when you respond to a comment on Facebook, that’s asynchronous. You could’ve done it in an hour or two hours or in the evening. So you’ve just got a higher probability of interacting with people if you’re slightly out of sync with them. You’re much more unlikely to be perfectly in sync with people.
Andrew: All right. Challenging, how does challenging work within Heyzap?
Jude: Sure. Challenging is a very specific type of invite. So in some of the games inside Heyzap, I can challenge a friend to play them right now. And this can work, usually it’s done synchronously, so I want to challenge you, I want to play with you right now. But it can be done asynchronously like, “This is my score. Can you beat it?” And the specific thing is that, inviting can just be very general, but challenging is very specific. It’s like, “Can you beat my score?” And that very specific nature of a challenge means that the call to action is very strong for the user, and it means that the click-through rate on the action will be much, much higher because the users will be, like, “Oh damn, Jude challenged me, I’ve got to win.” And it taps into user psychology. It taps into the way we think. And I think that’s very palpable.
Andrew: How many of your games have a challenge built into them? What percentage of your games have that?
Jude: So I would say, so we have a lot of casual games that are single player on our system, as well as MMOs and virtual worlds and social games, so for the social games and the virtual worlds and MMOs, the challenging mechanism is actually pretty high. I would say probably like 40%. For the casual games, the casual games are more single player, so they don’t have challenging so much, but they do have leader boards, which is more of an implicit challenge in a way. So leader boards are suggesting, you know, come and beat me. They’re not explicitly saying, so leader boards are kind of a challenge. They’re saying, “I see that score and I want to beat that score.” So leader boards are an interesting one. Some messages can be very direct, and some messages can be, the concept of a challenge can be built in subtly into other mechanisms.
Andrew: Before I ask you about the next step here, the next item, where is your accent from?
Jude: I am from London.
Andrew: You are. How long have you been in the U.S.?
Jude: I’ve been here for two years now, and it’s been going really well. The summer was great in San Francisco, except it just started raining.
Andrew: You moved in just after you guys got funding or just before?
Jude: So just before, and the objective was to get out here and to get to Y Combinator. My co-founder had been in Silicon Valley for a year before me, and I was really keen to get over here and I saw what people were doing and, like, the buzz and the energy and, like, all the people and all the acquisitions that were going on, all the money that was flying around here. So I had to get out here, and I think it’s the best move I’ve done.
Andrew: How do you know Immad, the co-founder?
Jude: I’ve known Immad for 15 years, and we are childhood best friends, which is awesome.
Andrew: Wow. What’s the breakdown in responsibilities between the two of you?
Jude: He’s more on the technical side, and I’m more on the business side. When it comes to product, we will kind of, like, come together and discuss the strategy and roadmap and stuff like that. We have many deals to make with game developers and website publishers, so that’s kind of more the business side and the operational side. And then we’ve got very complex systems with APIs and applications and widgets. So, I used to think that co-founding with someone that had very similar skill sets to yourself was the best thing to do, ‘cuz it’s like, oh I’m very good at what I do, let’s get a second one of me. But that’s not the truth. The truth is that you want to get someone that’s very good at something, but not what you do. You want to have common values, but different skill sets. And that means that you can build a very powerful range of skill sets and you can achieve different types of applications.
Andrew: And this is his second go-round at Y Combinator. He had a Y Combinator funded company before. He’s coming back. So you ended up getting a great co-founder here.
Jude: Yeah, I’m really pleased and we’ve known each other for a long time and we used to go to school together. We went to university together. We used to train together. So we both went our separate paths and did different businesses and have come back together to do what is, like, our baby, what is our proper startup.
Andrew: All right. I’ve got more questions about you and how you guys run the company, but I’ll come back to them in a moment. What I’m wondering now is, I’m looking at this chart that you sent me and I see all these different channels for sending out viral messages. Instant messaging, email, word of mouth, viral press, Twitter forms. What a lot of people will do is, they’ll just have one button that combines all of those actions in it, let people click that button and then pick the action that they want and then they’re off. You don’t seem to agree with that method, right? Why?
Jude: There’s two kind of schools of thought, and I think you can apply both. One of them is to make it really, really easy for the user. And if they’ve already connected with Facebook, for example, in a social game, then your channel is going to be predominantly Facebook, and you don’t necessarily want to confuse the user and get the user doing tweets at that point when they’re already in the Facebook environment. So the other way is to give the user the power, the action, the choice, and to let the user pick what actual channel they want to push into. So I think it depends on where your application sits. Like, if your application’s on the mobile, then iPhone push notifications makes complete sense. If your application’s more real time then pushing into an IM channel could be really interesting for you because that’s where people sit. That’s instant and very disruptive. So depending on like the synchronous or asynchronous nature and where your application sits, you’ve got to pick the right channel. And you can use multiple channels. So if you show the user many options, makes sure that you order the options. And if 2 are dominant over, say, 15 different ones, then make those 2 the biggest ones and drive them through that flow.
Andrew: What about profile items? You say that also helps the viral engine. How? What is it and how does it do it?
Jude: Profile items, so this is kind of being switched off slightly. So this is a form of a gift. Gifts are a viral object that I can send to you. So I can send you a free cupcake in Facebook, and you’re going to have a look at that and you’re going to interact with that and think about that. If I give you a message and say, “Hey, come and join me in this game,” this is giving you a free . . . for example Farmville has a seed, and I can give you that seed and you can go and plant your first tree and start your farm off. So that’s a viral object that I can send to you. And profile items would be like this is a badge that I won in Foursquare. And you could imagine like it would be pretty cool if you could put your badges on Facebook. You know when people see those badges, one, the user feels like it’s a sense of achievement because they got that badge and that is a retention mechanism. And two, if I share that badge onto Facebook, then that’s a viral mechanism, because if I don’t know about Foursquare I’m like, “Oh, that’s cool. What is that badge? What has my friend done? Have they gone out, travel it like the NASA badge?” That’s a viral badge. So the profile is for showing it off, it’s retention, it’s engagement of the user, and it’s a viral mechanism as well.
Andrew: What I’m looking at here is it’s about ten different methods, ten exactly different methods. Do you guys have something like this up on your wall, and when you’re developing or designing or thinking about your business you say what can we toss in there, like having spices on your shelf and saying which of these spices is going to make my food taste better?
Jude: I would say yes. And I would say the better you become at cooking, the better you know implicitly which spices to match up with what types of food. So I think you end up understanding that method’s not going to work, or we should go out with these methods at minimum and it starts to become like I’m cooking lamb I should use rosemary, that kind of implicit knowledge of the viral system. I don’t think we’ve worked it out fully and I think because it’s quite a new field. It’s only been around for like, I don’t know, how long has viral been around? For like 10 years maximum, 20 years, 5 years? So we’re still learning what are the best channels, and the channels are increasing and changing all the time. There are new channels. MySpace used to be important, and Facebook’s way more important now. So the channels are changing. Mobile channels are increasing, iPhone push notifications. So you’ve got to keep aware of the new channels coming out, and you’ve got to keep aware of what you’re actually building and how to apply all this stuff.
Andrew: All right. So the channels keep changing. Right now on this list I happen to have, as I said, emails, social networks, YouTube, platform, social bookmarks, which I don’t hardly use, viral press, word of mouth. But the methods, here’s what we got, and then we’ll pick another one and we’ll go dig deeper into it — sharing, inviting, challenging, which we talked about, profile items we just talked about, interacting, user generated content, responding, gifting, status updates, and I guess that last one is comments?
Jude: Yeah, comments. They’re kind of viral in a sense like they’re a retention mechanism and they can kind of be . . . if you’ve got for example in Digg you’ve got the up and down, like that comment can kind of become, if it’s really funny and it’s got the link in there, then it kind of can become like a viral engine. And I think there are more objects actually in there, I think there are more channels that are out there and different methods. So I’m still discovering and trying to understand and abstract all the methods that I see out there. The best ones I’ve seen are where the actual core idea is inherently viral. Like Quora for example, when it asks that question, that’s the main objective of the application. When asked that question, it’s also very, very viral because the network wants to answer it. And so if you’re core concept matches the viral mechanic, you’ve got a really killer proposition.
Andrew: What else is like that?
Jude: So I would say Foursquare, checking in, but the core concept of checking into it is inherently viral. I told my friends, I’ve told my network that I checked into somewhere, and that is a share essentially and the core concept locks into the viral mechanism very, very strongly. So even Twitter, so the core concept is the tweets, and the tweet starts off a viral chain of reactions. People want to respond to it, people want to retweet, people want to read it. And so that’s a perfect loop. If you make those perfect loops, I think you can have mass attraction.
Andrew: Hey, why didn’t Groupon get that? With Groupon, Andrew Mason told me the original concept was nobody could have this super great discount unless we hit a certain number of people who accept it. So no one has it until we have 100 people who say yes. And the idea there was if you’re number 90 or 95 or even number one, you have an incentive to go and tell all your friends to come and take this coupon because that’s the only way you’re even going to get it. He said people didn’t really pay much attention to it. It doesn’t get any lift. And if you look at their website, it’s now become a tinier and tinier piece of that page, almost to the point where I could imagine it’s going to go away at some point soon, that minimum that’s supposed to get more people interacting. Why didn’t that work as a viral mechanism?
Jude: I suppose in a way like I would’ve thought that it did, because that was the reason . . . I just did a LivingSocial thing with my entire office and lots of other people, we bought paint balling and it was precisely the reason why we had to get a certain number of people that everyone started like doing it. And I actually think that possibly is a viral mechanism, but the reason maybe it transitions is that once he built a brand like Groupon and he’s getting the discounts, maybe he’s already getting, he’s already going to have a certain amount minimum traffic anyway. So if he’s already getting 200 orders, he probably fulfills what their vendors actually require to get that discount. And then he can take that risk away from the users’ mindset by saying we’ve already got a great deal. So the risk is being hidden basically. Because he’s already hitting the numbers, he can probably hide that risk from the user, which increases the trust and increases the engagement from the user.
Andrew: Now, LivingSocial, a competitor, you’re saying there it did help you. Why? Why were you, what was the incentive to get you to tell your whole office or your friends to go paint balling with you there?
Jude: Well, there were two incentives. One the core reason of just being social and getting everyone out there. And two, I think we had to hit a minimum number of people to actually get the deal. So I think, here’s an interesting point that you stumbled upon, that viral mechanisms are important during the growth phase, but when you hit up to the top, you’re trying to optimize on a different set of metrics. You’re trying to optimize on monetization and retention and engagement. So the viral mechanics are really important in the transition growth. But say for example Zynga has maxed out the number of people that it can get on Facebook now. So they have to be more about retention. And they’re pushing out the quality of games and improving their monetization techniques and the viral mechanisms you can actually reduce. You can actually say oh, we’ve got all the users now. Let’s actually improve the quality of the experience and cut down the virality. This is what Facebook are doing, they’re cutting down the virality. inside Facebook. They’re reducing the K-factor of all the applications. So they turned off notifications, and they did very singular groups to prevent user acquisition occurring inside there. And they’re doing that for quality of user experience and engagement. So the viral mechanics you only really want to apply at the start, in the transition phase and in that transient growth. And then you’re switching over to a completely different ballgame. And that’s possibly why Groupon switched mode.
Andrew: I see.
Jude: [inaudible 28:08]
Andrew: Have you guys gotten to that point at all with any of your apps, with anything that you’re doing?
Jude: We know where we don’t want to go with virality, because there is a maximum limit where if you push it too high, you hurt your retention because you’re just spamming the users. So we’re still in the growth phase right now. And because the gaming market is so big and the network that we’re trying to build is huge, I think we’re still in that transient period where we want to get as many users as possible. If we look one or two years down the line, it might be more about turning virality down a bit and increasing retention devices and working on monetization aspects.
Andrew: Status updates. We know that Facebook’s got Twitter. That’s the sole reason for being it seems on Twitter. Is there room to do status updates beyond there, or are you just saying accept that those are the main methods and find ways to push out status updates to those channels?
Jude: I suppose status updates in a way is a method combined with a channel. Because when you say status updates, there’s already a type of sharing message and it’s already being applied to certain channels. It’s like a smaller form of sharing, and I think it’s becoming more and more mainstream. And a lot of new companies are trying to incorporate status updates, because everybody wants to know what the user’s feeling because if they know what the user’s feeling at that time, then they can adapt the application around it, right? So all these applications need to get inside your head somehow. They need to know your intention. They need to know what you’re feeling and what you want to do next. And if they know that, they can give you a good experience.
Andrew: How are you guys doing that?
Jude: We have various different sharing mechanisms. We allow people to push their status updates to Facebook and to Twitter. And I think they’re the two main mechanisms that we really use for status updates.
Andrew: But how are you figuring out what users’ intentions are and what their feelings are?
Jude: True. I think it’s a very new subject, and one is to explicitly find out what they want by letting them type their feelings and letting them type in the sharing box and the status box. The other one is to look at data and to say, “How long has this user been playing? What type of games have they been playing?” The most interesting company that I’ve seen doing stuff in this space is Hunch.com. They look at the data set and they look at what you like and they’ve got some really clever algorithms to try and predict what you’re going to like. So you can go on the website, fill out 20 questions, and it tells you what movies you like, what films you like. Now we’ve done a partnership with them to find out what games you like. They have this super smart algorithm. It’s amazing. You’ve got to take the test. It works out what you like. I think we’re going to see this on the Internet. Previously, applications were more reactive. Users did stuff, did an action, and then we changed the application or changed the game based on what users did. But we should really be giving users what they want and trying to predict what they want first so users don’t even have to do a search. Users having to go to Google and type in a question to me is a fail of user experience. Users shouldn’t even have to do the action. It should be done for them.
Andrew: How? How can you do that for me? I don’t want to get too far off track but . . .
Jude: I think it’s a big problem to solve. How can you predict what the user wants to search for? Say I go to YouTube and I type in a video that I want to watch. I’m browsing around and I’m exploring. I shouldn’t have to do that. That’s why StumbleUpon is kind of interesting because it’s working out what I like and it’s giving me movies and recommended films that I should like. So at the end of a YouTube video, you’ve got recommended videos and a lot of people click on them. That’s one form of predicting what the user wants so they don’t have to go back to the search bar and type in “kittens dancing movies” or something. So the problem can be solved on a very specific vertical level. It can be solved for videos or games and for very, very specific verticals. When you apply to a general problem, what does this person want? That’s a very hard problem. So I think we can break down the little parts. We can do video, we can do games, we can do news and keep breaking these down. And then eventually, some startup’s going to come up there, work out what people want before they have to type it in, and they’re going to disrupt Google. But that’s way off. I just feel that users shouldn’t even have to type. Things should be shown to them that are interesting and relevant to their graph, to their day, to their interests, and to the problems that they’re trying to solve as well.
Andrew: I know that there are certain things that I do that should be and I feel like they could be really automated or done for me. Like looking you up before an interview. Frankly, if you and I were just going to get on the phone together, I’d like something to look you up and say, “Here’s what Jude’s about. Here’s what you thought or here’s what you talked to him about in the past.” And so on. There’s no system like that. I still have to go to Google and I know exactly what I’m going to type in: I’m going to type in your name. I’m going to type in your name in LinkedIn, your name and Heyzap. I’m going to type in your name in TechCrunch because they probably covered you. And maybe I’ll fish around and I’ll find out that maybe you had a message board that you were really passionate about. I discover that and then I’d go do a site search just on that message board to see what you thought of on there.
Jude: You want everything in front of you, right? And the Facebook/Skype deal is a great example of this trend, right? So precisely for this use case, I’ve connected my Skype to Facebook and now I can see a bit more information about you when we connect up on Skype. I want the LinkedIn connected and I want the TechCrunch articles pulled in and I want the related videos pulled in. I think this is a trend basically. We’re interconnecting everything more and more, and we still have a long way to go. The web is still broken when we have to do searches.
Andrew: All right. Gifting. I can see how gifting is viral. That’s another method here. If I’m buying a gift or picking a gift, I can’t just sit on it. You don’t just give it to yourself. You have to pass it on. How do you create a gift though that encourages people to pass it on? That pushes them to pass it on more than they would otherwise?
Jude: There’s two kinds of separations that I would make. The first one would be a very crude way of doing it where you say, “Here’s a gift.” Say it’s heart-shaped and it’s Valentine’s Day and you’re going to send it on to your friend. Create some karma or create some love in this network. That would be one way of just telling the user to do it. If you tell the user to do it, sometimes they actually do the action. The other way is to be a bit more clever and to . . . the other way is to be smarter about it and say, “How can we get this user to take this virtual good and share it with someone else?” So one way would be saying, “It’s like a zombie egg and if you don’t pass it to the next person, it’s going to hatch in five hours.” And maybe someone will want it to hatch because it’ll be fun and then you get them in the game. And the other ones that don’t want it to hatch might share it on. So you’ve created a retention and a viral method in one little fun little virtual good.
So the Zynga seed is the first great example I think of this type of mechanism where I give you a seed. The seed can change into something else if you do an action. So if the user can be excited in a change inside the gift and you can relate that excitement to a share or an engagement, then you can get this gift to become viral. The other one would be the breast cancer pink ribbon. That in itself is a kind of viral motif. People want to share it and be part of it and they pass it on and then someone else wants to do it. The beards for the SF Giants, who are doing so well right now . . . the beardification application, have you seen that one? It beardifies your profile picture inside Facebook. And that in a way is kind of a gift, it’s kind of a virtual good in a way. And that is viral because someone sees it, and then they’re like, “Oh cool. I’m going to do that to myself.” So that’s a very visual viral application. I think just applying a small amount of creativity you can have a very viral mechanism in that field.
Andrew: Do you see this done for non-game sites as well? Who’s doing it well?
Jude: Applying game mechanics to other websites is a really interesting new field. The field is being called the “gamification field,” and there are brand new conferences that are opening up in this space. And there are four companies that have gotten VC funding in this space. So a great example of someone that applied game mechanics to a non-gaming website, nothing to do with games, is Squidoo. The site is essentially a content platform. So I write content and I can monetize my content and I can publish it. So in order to complete the profile, it’s got a profile completeness bar, which you also see on LinkedIn and Facebook. That’s a game mechanic. So profile completeness and you get points every time you make a change or release a paper. It encourages you to actually get the content out. And you can even break things down, like if you write another paragraph, you get another point. If you write another paragraph, you get another point. If you release the blog, then you get 20 points. So you can break down and apportion the different actions that are inherently boring. The actual work is boring. But if you make it more into a game and you make it into points and you can buy stuff with these points, then it makes it more exciting.
This is a classic example if you look at the military or if you look at Scouts. When you do Scouts and you get the different badges, that’s actually game mechanics applied to Scouting. If you look around karate, karate has different belts. Those belts have nothing to do with the fighting. They have nothing to do with the technique, they have nothing to do with the fitness. You can get fitness in a gym by yourself. But they’ve applied game mechanics to karate so you have to level up each time. And if you look around you, very successful activities have different types of game mechanics actually applied to them. So they’re actually sitting amongst us in real life. Also 24-hour fitness they give you points if you check into the gym over and over again, and you can buy stuff with the points.
So I think we can apply this to many different websites. LinkedIn’s done it. Facebook kind of did it. Squidoo’s done it really well. That’s worth checking out. So I think only 5% of the websites out there have applied game mechanics properly to their website. So there’s a lot of stroke there to improve sites and make boring tasks actually fun. Education’s a good one as well. Education’s going to move online. If we could make teaching mathematics into a game where you get points and you level up, people would love it and it would get the boring parts out and break them into chunks and incentivize the user as they’re going up the learning curve.
Andrew: I can see that. I know I’d want to be a part of it. I think Sal Khan tried to do that, and he’s just carried away creating the new courses. So I don’t think he’s developed it as much as he could, but I could see that being added to the Khan Academy too.
Jude: I think it’s just the beginning on that. I would learn languages if it was all broken down into nice chunks and all I’ve got to do is sit there and go up the learning curve. It’s an interesting abstraction that, if we can break down the learning curves and . . . everyone’s got a learning curve when they’re learning something new. And if you can make the application follow that learning curve perfectly and make it smooth, smooth out their learning curve, then you’ve got a win. There’s lots of dynamics around not going too far up the range of the learning curve. That happens in the classroom. Some kid’s falling behind and some kid’s bored because he’s way ahead, because the learning curves aren’t matched and no game mechanics are applied at all.
Andrew: Let’s talk about responding. What’s that method?
Jude: Responding. I have actually forgotten what that method is. I did that blog post a year and a half ago, so I had an idea . . . I could try and maybe re-come up with what the idea was. I think it’s possibly responding to the actual comment. I can’t completely remember. This might be slighting out of date as well, so let’s skip responding.
Andrew: Okay. In that case, the final one that I’ve got here, I think we talked about everything except for interacting.
Jude: Interacting. In a sense, chat is mainly a retention method. But you could say that chat is a viral method as well, because if I’ve got chat in an application or a game, then just the prospect of there being chat . . . it’s kind of an acquisition engine because I’m like I could go and chat in there. It’s kind of a retention method because I’m talking there, and then tomorrow I can talk in there. Also sometimes people take quotes from chat and they put them in IM. And then they’re like, oh, that’s a funny chat room. I’m going to come into that. So there are various different parts where acquisition and retention and virality all link together. Chat is an interesting one because it touches amongst all of those three areas. So I’d say interacting can be viral as well.
Andrew: I was doing a Google search as you talked to see if I could come up with something for responding from your past blog post, but I couldn’t come up with anything.
Jude: I don’t know whether I broke that one out at the time.
Andrew: Fair enough. Now that we’ve gone through it, I’ve got a couple of other questions that aren’t directly related to this that I’ve been wanting to ask. First of all, last name. Guy from London has a last name Gomila? We started talking about this in the pre-interview. What’s the story there?
Jude: I’m half Gibraltarian.
Andrew: Half what?
Jude: Gibraltarian.
Andrew: What’s that?
Jude: So Gibraltar’s a funny little . . .
Andrew: Oh, Gibraltarian. Okay. Gibraltar. Right.
Jude: So the name is actually from Majorca, and I’m half Gibraltarian. I suppose it’s Majorcan origin through Gibraltar. I think it means “rope maker” which I don’t mind. Ropes need to be made.
Andrew: You’ve got Fred Wilson as an investor. What’s he like? How hands on is he considering that he’s on the other side of the country?
Jude: So Albert Wenger is actually on our board, so we mainly deal with Albert. We deal with Fred sometimes as well through email. So Union Square Ventures has been amazing for us and Albert is mainly . . . he did Foursquare as an investment and Twilio, which is doing really well and he’s a board observer for Etsy. So he’s got some great, awesome investments, and Fred Wilson is obviously very into Twitter and on that. They’re involved in Zynga. Between them all, they’re just like the best investors to work with. I share the same thesis of investment with them of their going after companies that can build very, very strong network effects. Not necessarily ones that grow really big. It’s about ones that have network effects, ones that can be sustainable and have a lot of leverage and build a protectable, sustainable business. I’m really excited to work with them, and I think the portfolio’s great and it’s good not to be . . . sometimes investors can actually cap your performance and send you in the wrong direction. Working with really smart people and doing the Portfolio Summit every year, we go down to New York and we all sit around a big table and everyone talks about their problems and they talk about how we can solve these problems. And we do breakout sessions and we talk about the trends of what’s going on. So it’s nice to be involved in that kind of community and share a commonality. Y Combinator’s got a great community of 550 founders, and Union Square Ventures have Dennis Crowley from Foursquare and from Evan Williams from Twitter. It’s good to sit in a room with these guys and to learn from them and hopefully to come up with something interested as well that they can learn from you.
There are two very different networks, and it’s nice to also see companies that scale to 100 or 500 or, in the case of Zynga to 1,000 employees and learn from that. So there are different mechanics to learn from the Y Combinator side and the Union Square Ventures side.
Andrew: You mentioned that you share their investment thesis? You’re investing also I noticed.
Jude: I just started. I did a small amount in inDinero, which is a new Y Combinator company and it’s done by Jessica Mah. She’s a great entrepreneur. Their pitch is essentially they’re becoming a Mint.com for business. There’s a big problem in the market right now that loads of small businesses have to go to bookkeepers and then they go to accountants when all the data can be tagged and automated just like Mint did it. So I think she’s got a good opportunity to disrupt the bookkeeping market which is huge, and she can automate that. I want to have a real time profit and loss account and balance sheet, and I don’t want to have to use any human interaction. All the data’s there. Tag it up and just give me everything I need. I want to see it on a wall. I want to see how much I’m spending on a rolling 30-day basis, and then I want to be able to push it to tax, the tax returns, in an automated way. That’s the hard part, automating the tax return and keeping everything . . .
Andrew: Categorizing is such a dead easy, mind numbing job if a human does it. Dead easy if a computer does it. Just understand every time I go to Staples, it’s got to be office supplies. If I’m bringing in $25 from this person month after month, it’s the same thing, it’s the same category. Just do it for me and pull it out of PayPal so I don’t have to. What’s a guy who’s running his first startup doing investing in other startups?
Jude: This is my first proper startup and first proper Silicon Valley startup. I did run a company in the UK where I actually bought a brand of electronics and I sold it into Harrod’s and Selfridges and Amazon and my own ecommerce store. So I have been doing buying and selling of objects since I was 16. So I’m very keen to get into the investment field, and I think there’s still a ton of opportunities. There’s such an abundance of good ideas coming out of Y Combinator and other incubators. I think there’s still a great amount of money to be made, and I can live frugally. I run100% geared all the time as in I will always use all my money to go on the highest risk investments for the maximum growth.
Andrew: Gotcha. So in other words, if you get $25,000 in salary next month, you’re going to take all $25,000 and invest it in another company because you don’t really need it.
Jude: I wish I was getting that salary, but I’ll take the money and I run on zero. I don’t need to keep any money in there, because I know that if I want to make a 100k really quickly then I can.
Andrew: How? How are you going to make 100k very quickly?
Jude: Google AdWords arbitrage.
Andrew: There’s no money in that anymore, is there?
Jude: You can make 100k very quickly if you want. There’s no scalable money. Well, maybe there’s some scaling options, but you can make quick money on Google ads.
Andrew: I see you’re a little bit uncomfortable. This is where it’s great that we have video. Once we started talking about arbitrage, I started seeing you get a little uncomfortable. Do you know somebody who is doing well, doing $100,000 in arbitraging Google AdWords on the side?
Jude: I did some arbitrage work.
Andrew: Oh. You yourself did it? How long ago was this?
Jude: I did some arbitrage in 2008, 2007.
Andrew: So not that long ago. Back then people were already starting to say that it was over and you were arbitraging. For how long?
Jude: I did it between projects. I would just make cash out of selling products and . . .
Andrew: Google arbitrage basically means you’re buying an ad on Google and then you’re getting people to come to your website where you’re making money from Google ads.
Jude: You either actually sell something or connect it to someone that can sell it. As long as you make a high ROI . . . there’s actually an important part to come out of this. So as long as you make a high ROI on the ads, you’re fine. If it cost you $2 to get the user in that will buy something and you’re making $4, then you just max out that ad space and you carve out that vertical. The trick about that one is to really understand the vertical and to really get into the ROI calculation, really try and work the numbers so that you’re the best out of all the competition. You have to be very smart about how you pull all the variables together, and you have to come in with a lower base cost or something like that. You have to do something innovative if you want to make a profit there. I still think it’s really easy to do that, but it’s not scalable. That’s the problem. It’s not scalable, it doesn’t make a really big business. There’s a good article from Chris Dixon called the “Builders vs. Arbitragers.” It might be called something different. But basically, there’s two kinds of ways you make money in business. You either make money from moving something around or you make money from building something that has real economic value. I’m much more interested in building something that has real economic value. I actually think a lot of companies out there make money from just moving something around. A perfect example would be investment banking. It doesn’t mean the market’s less efficient. It just means we’re not growing the pie. We’re making the pie more efficient, we’re making the pie more tasty, but we’re not making the pie bigger. The most important businesses, things like Facebook and LinkedIn, for me, they’re building things that are really interesting. And TESLA for example, they’re really building something. And then there are all the other arbitrage businesses on just a purely philosophical, moral level it’s good to make money out of it quickly but go and do something meaningful. Go and do something where you’re building something. So I think the builder versus arbitrager argument is really interesting now. Because now people are saying, ‘Are you building something or are you arbitraging?” Investors are starting to look at that as well.
Andrew: That’s what?
Jude: The best investors are starting to look at it in that way.
Andrew: Are we investing in companies that are arbitraging or companies that are making?
Jude: Yeah. I think the best investors are going to be doing things where they’re making . . . I regard inDinero as something that’s making. They’re making that process completely way more efficient. It’s not an arbitrage play.
Andrew: Who’s got an arbitrage play that’s a tech startup? I can’t think of one.
Jude: I’m going to say something controversial here. Advertising, in a way, is completely, the whole industry is an arbitrage play. The user wants to buy something and this product’s being made. It may not match the user’s needs. Sometimes it does. And it’s about matching what the user thinks they want against what the user perceives that this product does against this product. So advertising, in a way, is a form of arbitraging, connecting these products. In the cases where advertising connects the product to something where the user really wanted that product, that’s okay. In the case of the advertising, connecting users to something they really didn’t want to buy, i.e., impulse buying, that’s possibly not okay. I think we need to move . . . and this relates to our economy as well. We need to move to a mode where we actually sell things that actually make the world more efficient. Entertainment is important though as well. Delivering quality entertainment rather than tacky things I think are important. If the user’s having fun, then that’s another driver as well. The user has to be having fun. We don’t want a user to have buyer’s remorse.
Andrew: All right. Let’s leave it there. The site is, as everyone saw on your jacket up until a second ago, it’s Heyzap. Heyzap.com. I like that you went and you got a jacket to make sure that we all saw the Heyzap logo. I like that. There are a few entrepreneurs who did that. The one who most famously for me did it was the founder of Eventbrite, Kevin. Kevin walked his computer all around his office until he found an Eventbrite sign that could stand behind him comfortably. He positioned his computer properly so that it was him kind of in the picture, Eventbrite really big in the picture. Even a small audience like mine, in comparison to the giant audience that he has that’s marketing his stuff, needs to see his logo. I really like that attitude.
Jude: Everybody wants to see the logo. Or maybe they don’t. Maybe the founders want everyone to see their logo. Logos are a really powerful thing. It’s an interesting thing that the logo in Silicon Valley is so important. Sometimes even more important than the product.
Andrew: What did you guys spend on your logo?
Jude: How much did we spend money wise?
Andrew: Yeah.
Jude: Zero. Well, six hours of my time.
Andrew: Oh, you designed that logo?
Jude: Yeah. On the second day of the company.
Andrew. That’s a good logo.
Jude: I’m very pleased with it. I don’t ever want to change it ever. You can evolve the logos, but you don’t want to do a big change unless you’re . . .
Andrew: I saw what happened when the Gap did it.
Jude: Gap and the MySpace thing. I’m not sure about that, the new MySpace logo. Have you seen it?
Andrew: I did see it. It’s “my” and then a blank space. It’s done by Mike Macadaan. That guy’s very artistic.
Jude: It’s smart. It’s smart.
Andrew: It’s a big risk. I like his sensibility. We’ll see where he goes with it. I’d be curious to see if MySpace could apply some game mechanics to their system to get us a little more engaged.
Jude: I think they can. I looked at the new design and it looks nice. They’ve cleaned it up a lot, and I think it’s a good idea. You should ring them and tell them that. They should apply game mechanics and take some games as well, because taking games into a website is also kind of applying game mechanics to the site as well. But they’re more embedded, if that makes sense. The engagement is there. Gamification is a really interesting subject. I think we’re going to see so much more of that next year.
Andrew: The guy’s name is Mike Macadaan. M-A-C-A-D-A-A-N. I’ve got Jude here from Heyzap. He has an idea for how you can use game mechanics to help MySpace grow and become more engaging. If he’s a guy who’s really plugged in and he’s searching for new ideas, then he’ll have a vanity alert on his name and he’ll want to hear this. If not, that’s fine. I know Mike from when I lived in Southern California, and he’d be open to ideas. But let’s see how open he is right now. We’ll find out what his response is. And Jude’s email address is?
Jude: Jude@Heyzap.com. That’s Jude@Heyzap.com
Andrew: All right. Let’s see what happens with Mike. Mike, hello. Jude, thank you very much. Good to do this interview with you finally, and thank you all for watching.
Jude: Thank you very much Andrew. Have a great day. And thank you for all the listeners out there. I wish you all the best with your applications and website.
Andrew: Right on. Bye
This transcript brought to you by www.SpeechPad.com.
